CUPA HR Lone Star Chapter Meeting N ovember 5, 2010 Developing an Effective Retirement Strategy For...
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Transcript of CUPA HR Lone Star Chapter Meeting N ovember 5, 2010 Developing an Effective Retirement Strategy For...
CUPA HR Lone StarChapter MeetingNovember 5, 2010Developing an Effective Retirement Strategy For Administrators and Employees
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WHAT’S YOUR VISION OF RETIREMENT?Enjoying a comfortable and potentially rewarding retirement will depend on:• Good health• Relationships with family and friends• Having enough money
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RETIREMENT ISN’T AN END IT’S A BEGINNING• Maybe it’s time to “retire” the term since you won’t retire your lifestyle• The only thing that changes is where your money comes from
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OBJECTIVE OF TODAY’S SEMINARHow to move successfully from working for your money to having it work for you
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GENERALLY THESE WILL BE YOUR MAIN SOURCES OF RETIREMENT INCOME:
Personal Savings
Employer Pension
Employment Social Security
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HERE’S AN EXAMPLE OF WHERE YOUR RETIREMENT INCOME MAY COME FROM
RIGHT NOW EARLY RETIREMENT YEARS
LATER RETIREMENT YEARS
SOURCE: TIAA-CREF
EMPLOYMENT
PERSONAL SAVINGS
SOCIAL SECURITY
EMPLOYER PENSION(incl. TIAA-CREF)
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0
10
20
30
40
50
60
70
80
90
100
FIVE HAZARDS1. Outliving your income
2. Inflation
3. Unpredictable investment returns
4. Unanticipated expenses
5. Not staying within budget
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HAZARD #1
OUTLIVING YOUR INCOME
Here’s to a long life!
But will you have enough to live on?• You need enough to sustain you to an advanced age
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HAZARD #2 INFLATION$9.50 for a cup of coffee?
Will your income keep pace with inflation?• Inflation may “raise the bar” of how much you will need• It will cost you more to buy the same things you buy today
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HAZARD #3
UNPREDICTABLE INVESTMENT RETURNS
I hadn’t planned on that.
Will your investments perform?• Reduced principal can mean an income stream is less than anticipated
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HAZARD #4
UNANTICIPATED EXPENSES
I never get sick!
Can your budget handle life’s surprises? • You need to prepare for unforeseen events including extraordinary
medical expenses and long-term care
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HAZARD #5
NOT STAYING WITHIN BUDGET
Did we really need that?
Do you have a budget and are you within it? • Living above your means may deplete assets in later years
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SO WHAT DOES ALL THIS MEAN? It means you must have:• An adequate accumulation to retire• A plan for providing an income stream you won’t outlive* • An emergency fund(s) for unanticipated expenses
* All guarantees are subject to the issuer's claims-paying ability.
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GETTING WHERE YOU NEED TO BEDetermine what you have now and then calculate your needs for retirement
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GETTING WHERE YOU NEED TO BE• If necessary, consider modifying your strategy• You may still have time to boost savings• If possible, adjust your income needs and explore other income sources• Review your investment mix to optimize potential return• Consider assuming more risk in your portfolio, consistent with your risk tolerance• Remember to take taxes into consideration
- 20% mandatory withholding/ordinary income- Possible tax penalty
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THE BUILDING BLOCKS OF A WELL-DESIGNED RETIREMENT PLAN
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GUARANTEED – consisting of fixed annuities offering a guaranteed payout based on the underlying insurer’s claims-paying ability
EQUITIES – stocks or stock funds
MONEY MARKET – short term, highly liquid instruments
REAL ESTATE – direct real estate investments, or real estate investment trusts
FIXED INCOME – government and corporate bonds or bond funds paying a fixed rate of interest
INVESTING AND TAXES
DIVERSIFY ACROSS ASSET CLASSES, AND WITHIN THEM
17Diversification is a technique to help reduce risk. There is no absolute guarantee that diversification will protect against a loss of income.* Based on the claims-paying ability of TIAA.
LARGE CAP
MID CAP
SMALL CAP
INTERNATIONAL
GUARANTEED*
FIXED INCOME
EQUITIES
REAL ESTATE
MONEY MARKET
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RETURNS BY ASSET CLASS AND INFLATION OVER THE LONG TERM (Please note that past performance is no guarantee of future results.)
THE BUILDING BLOCKS OF A WELL-DESIGNED RETIREMENT PLAN
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MUTUAL FUNDAn investment company that pools funds from individuals to buy securities selected to meet specific criteria and goals.
ANNUITYA contract by which an insurance company agrees to make regular payments to someone for life or for a fixed period. Annuities usually either pay a fixed rate or one that varies based on market conditions.
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5,000
10,000
15,000
20,000
25,000
TAKE ADVANTAGE OF HIGHER CONTRIBUTION LIMITS2010 Limits for Salary Deferral Retirement Plans*
MOST EMPLOYEES EMPLOYEES AGE 50 AND OLDER WITH 15+ YEARS OF SERVICE
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$25,000**
403(b) Plans Only
$22,000 401(k) and
403(b) Plans
EMPLOYEES WITH 15+ YEARS OF SERVICE
EMPLOYEES AGE 50 AND OLDER
$19,500**
403(b)Plans Only
$16,500 401(k) and
403(b) Plans
* Based upon your salary, you may contribute up to the maximum amount under each scenario represented by the different bars.** You must be an employee of an eligible teaching institution, hospital, church, home health agency or health and welfare service agency to be eligible for these contribution limits. Note: 2010 limits for salary deferral retirement plans. Source: www.irs.gov
DOLLAR COST AVERAGING CAN WORK TO YOUR ADVANTAGE• Contribution made regularly and systematically• Generally not as vulnerable to market levels as investing all at once• Potential lower average cost per share• Does not guarantee against loss
INVESTING AND TAXES
Dollar cost averaging does not assure a profit or protect against a loss in declining markets. Because such a strategy involves periodic investment, you should consider your financial ability and willingness to continue purchases through periods of low price levels.
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All Of You Represent Institutions With Very Attractive Retirement Benefits To Help Your Employees Prepare For A Secure Financial Future• Experienced and well-known investment providers
• A variety of ways to save: 403(b), Roth 403(b), 457(b), IRA Products
• Ongoing support and education
• Online tools
• Dedicated resources to help you achieve your goals and objectives
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Investment products are not FDIC insured, may lose value, and are not bank guaranteed. You should consider the investment objectives, risks, charges and expenses carefully before investing. Please call 877 518-9161 or visit tiaa-cref.org for a prospectus that contains this and other information. Please read the prospectus carefully before investing.
TIAA-CREF products may be subject to market and other risk factors. See the applicable product literature, or visit tiaa-cref.org for details.
TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products. Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association (TIAA) and College Retirement Equities Fund (CREF), New York, NY.
C47985
© 2010 Teachers Insurance and Annuity Association-College Retirement Equities Fund (TIAA-CREF), 730 Third Avenue, New York, NY 10017
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